March 03, 2010 - By EnerCom
In three separate transactions, Petrohawk Energy (NYSE: HK) announced it had sold a total of $175 million of proved reserves and producing assets in the Mid-Continent region. The sales price was $5.83 per thousand cubic feet of natural gas equivalent (Mcfe) or $34.98 per barrels of oil equivalent (BOE) of proved reserves. This compares to a weighted average price of $2.22 per Mcfe ($13.29 per BOE) for sold Mid-Continent assets, from data compiled by Scotia Waterous.
The largest of the three divestitures was in West Edmond Hunton Lime Unit (WEHLU) Field in Oklahoma. As of December 31, 2010, Petrohawk's WEHLU Field had proved reserves of 23 billion cubic feet of natural gas equivalent (Bcfe) and production of 12 million cubic feet of natural gas equivalent per day (MMcfe/d). Based on the purchase price of $155 million for these assets, the deal was completed at $6.74 per Mcfe of proved reserves and $12,917 per flowing Mcfe/d. The Hunton formation is 55% gas, 8% light oil and 37% liquids.
Operationally the total divestiture represents about 1% of Petrohawk's year-end reserve base of 2.75 trillion cubic feet of natural gas equivalent (Tcfe) and roughly 3% of its daily production. The Company's 2009 proved reserves increased 94% or 1.33 Tcfe compared to 2008. Prepared by Netherland Sewell, the increase in reserves is nearly all attributable to the Company's successful Haynesville drilling program.
In its year-end 2009 results release, Petrohawk reported cash and restricted cash of $215.2 million and $203.0 million drawn on its revolving credit facility. Total available liquidity at the end of the quarter was approximately $1.2 billion. The Company's net debt to book capitalization ratio at the end of the quarter was approximately 44%. For 2010, Petrohawk estimates it will invest $1.45 billion in its drilling and exploration program and is forecasting production growth of 36%. Petrohawk trades at a 2010 price-to-cash flow multiple of 7.5 times, or 15% better than its large-cap peer group average in EnerCom's E&P Weekly.